Payment Protection Insurance - the late fruits of Bank Lobbying: 100.000 Complaints in the UK and mass lawsuits elsewhere

Why too much Lobbying in Brussels may have hurt the Banking Industry

In 1998 the EU mandated a study from iff on Payment Protection Insurance with regard to consumer credit. The findings were alarming: up to 50% of credit cost were hidden in such factually linked contracts. Most of this money consisted out of hidden interest since it flew back to the banks in the form of kick-back provisions.
The wave to allocate credit cost invisibly in bye-products crossed the Channel and had already entered Germany, the Netherlands and France.
The Commission followed the recommendation of the expertise in its 2002 Consumer Credit draft and ruled that all PPI which was conculeded at the same time the credit contract came into force should be disclosed in the Interest Rate (APRC). Constant lobbying especially in the European Parliament led to the total rejection of this usefull draft. It was replaced within 3 month time only by an obviously pre-manufactured new draft which then became the official CCD 2008/48/EEC. The terrible four: UK, Ireland, Germany and the Netherlands, had been the forerunners of an idle legislator in the Council while Austria had tried up to the last minute to introduce a solution.

Encouraged by the neo-liberal legislator the banks started to use PPI as their main instrument to make extra profits. Sadely enough the weaked consumers were the victims. The championship for the worst bank won Citibank who perfectuated this system through short term refinancing up to four times a year in which always most of the premiums were lost as already consumed provisions of the bank. A credit with 15% would thus retroactively been mounted to more than 30%.

One does not solve problems by ignoring them. This seems to be the message of the recent campaign in the UK as our UK partner the Centre for Responsible Credit reports. Now national courts have started to use other means to cope with the rising rage of the public.

While in the UK the OFT and the courts use competition law ("misselling") in Germany the supreme court found that the credit contracts who are linked to such insurance products should have been equipped with a special information on the right of withdrawal. Since this has been neglected until now the court gave consumer already years later the right to withdraw and cancel the insurance contract including its finance charge. Many insolvent consumers as well as the insolvency administrators use this new opportunity to remedy what the banking lobby hindered the law to regulate.

English "Ombudsman calls on banks to deal with outstanding PPI complaints"

The Chief Financial Services Ombudsman, Natalie Ceeney, has called on banks to deal with the backlog of complaints concerning PPI mis-selling following the recent High Court ruling dismissing the bank's legal challenge on the issue.

Writing in the latest Ombudsman News, Ms Ceeney, comments that:

"The PPI complaints workload has been the biggest challenge the ombudsman service has faced over the last year. In the last twelve months we have received over 100,000 new complaints alleging mis-selling of PPI – more than half of our total caseload and more than double the number of PPI cases we received in the previous year.

The approach taken by the businesses involved in this legal action has meant that we have not been able to resolve as many of these cases as we would have hoped. This has led to delays, uncertainty and frustration for the consumers involved – large numbers of whom have seen little or no progress on their PPI complaints for many months.

As an organisation that aims to provide a good customer service, we have not enjoyed having to explain these significant delays to large numbers of our customers.

This is why – now we have a clear-cut ruling from the High Court – we all need to work together to resolve these complaints as quickly as possible. It will greatly benefit all of our reputations to do so."

"The British Bankers Association (BBA) today lost a High Court judicial review against FSA guidance on Payment Protection Insurance (PPI) mis-selling complaints. Although the BBA is considering an appeal, we hope the judgment will speed up compensation for thousands of mis-sold customers who have had their cases upheld by the Financial Ombudsman Service (FOS), and resolve uncertainly on how far back mis-selling claims can go.

Responding to the High Court judgment, Which? chief executive Peter Vicary-Smith said: 'Today’s announcement is a huge victory for consumers. If the banks paid redress to every consumer who had been mis-sold PPI, they’d be looking at a possible £3 billion bill. Instead of dealing with mis-selling, they’re trying to wriggle out of paying up using the courts - this now has to stop.

'The banks need to admit defeat, stop outsourcing their complaints handling to the Ombudsman and finally do the right thing by their customers. 'The sheer volume of PPI complaints the Ombudsman upholds in favour of the consumer proves that consumers should always go to the Ombudsman if their claim is rejected by their bank.'"

ID:

47030

Publication date:

05/05/11

World Partner

EU-Partner

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